European stocks retreat as financials drop; DAX down 1%

Forexpros - European stock markets were sharply lower on Monday, as shares in the financial sector came under selling pressure after European bank stress tests failed to ease concerns over the health of the region’s banking sector.

The European Banking Authority said after markets closed on Friday that eight banks out of the region’s 90 top lenders failed its stress tests, with a combined capital shortfall of EUR2.5 billion.

The EBA said 16 banks narrowly passed the stress tests. Of the banks that failed the tests, five were in Spain, two in Greece and one in Austria, while all of the region’s biggest firms passed the test.

While the results were better-than-expected, the tests did not include the possibility of a sovereign debt default, which many believe was a likely outcome for Greece.

On the upside, electronics giant Philips climbed 1.5% after announcing it would buy back as much as EUR2 billion worth of shares. The company said it swung to a second-quarter net loss of EUR1.34 billion, citing weaker markets and after it took an impairment charge of EUR1.4 billion.

In London, the FTSE 100 slumped 0.9% as U.K. lenders tracked losses from their European counterparts.

The outlook for U.S. equity markets was downbeat amid mounting concerns over a potential U.S. sovereign debt default

The Dow Jones Industrial Average futures pointed to a loss of 0.5%, S&P 500 futures shed 0.55%, while the Nasdaq 100 futures indicated a decline of 0.6%.

Later in the day, the U.S. was to publish a government report on the balance of domestic and foreign investments.

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